What's the actual point of common property law for tax filing? Seems counterproductive

Thanks for explaining! But if the property laws consider us equal owners of all income, why am I seeing a tax disadvantage for my lower-earning spouse? Shouldn't it balance out somehow? Also, do you know if there's any way around this Form 8958 requirement? It seems unnecessarily complicated for what we're trying to do.

The tax disadvantage comes from how the income splitting interacts with our progressive tax system. Even though you're splitting income 50/50, you're losing some of the benefits of the joint filing status, like certain credits and deductions that don't transfer well to separate returns. Unfortunately, there's no way around Form 8958 if you're filing separately in a community property state - it's required by law. The IRS uses it to ensure proper income splitting. One alternative might be to look into whether your state allows for a formal agreement to keep certain income separate, but that's something you'd need to discuss with a tax professional familiar with your state's specific laws.

Does it actually help with figuring out the calculations for Form 8958? My spouse and I need to file separately because of her income-based student loan payments, but doing the 50/50 split manually is driving me crazy.

I'm skeptical about these services. How is this any better than TurboTax or H&R Block which also handle community property states? Just sounds like another tax service trying to get our money.

It specifically breaks down how to allocate each income and deduction item on Form 8958, showing which are community property and which remain separate. Made it much clearer than trying to decipher the IRS instructions. For your question about comparison to other services, the main difference I found was the document analysis. Rather than just asking questions, it actually examines your documents and highlights potential issues specific to community property situations. In my case, it caught that I was incorrectly splitting some investment income that was actually separate property from before our marriage.

Wait, how does this even work? The IRS phone system is literally designed to be impossible to navigate. Are they using some kind of backdoor?

Sounds scammy. Why would I pay for something when I can just keep calling the IRS myself? Eventually they pick up if you call at the right time.

They use an automated system that navigates the IRS phone tree and waits on hold in your place. When they reach a live person, you get a call and are connected directly to the agent. No backdoor or anything sketchy - they're just taking the waiting part off your hands. I understand the skepticism - I felt the same way! But after spending literally 4 days trying to get through myself, constantly getting disconnected after waiting for hours, it was worth trying. You're right that eventually they pick up, but "eventually" can mean days of attempts during tax season, especially for complex issues like community property questions.

Do you know if common property rules still apply if you're legally married but have a prenup? Our agreement specifically states our incomes remain separate, but I'm not sure if the IRS cares about that for Form 8958 purposes.

Yes, the IRS does actually recognize prenups for tax purposes in community property states, but the rules are very specific. Your prenup needs to explicitly outline how income and assets should be treated (not just a general "our incomes are separate" statement). You'll still need to fill out Form 8958, but you would allocate income according to your prenup rather than the standard 50/50 split. However, make sure your prenup complies with your state's requirements for it to be valid - some states have very specific rules about prenups overriding community property laws.

Generally, if you bought it before marriage, the original investment stays your separate property. However, any appreciation during marriage is typically considered community property in most community property states. So you'd need to establish the value at the time of marriage and then split the gains from that point forward.